N.Y. Insurance Law § 7435: Distribution for life insurers

§ 7435. Distribution for life insurers. (a) The priority of

distribution of claims from the estate of a life insurance company in

any proceeding subject to this article shall be in accordance with the

order in which each class of claims is herein set forth. Every claim in

each class shall, subject to such limitations as may be prescribed by

law and do not directly conflict with the express provisions of this

section, be paid in full or adequate funds retained for such payment

before the members of the next class receive any payment. No subclasses

shall be established within any class. The order of distribution of

claims shall be:

(1) Class one. Claims with respect to the actual and necessary costs

and expenses of administration, incurred by the liquidator,

rehabilitator, conservator or ancillary rehabilitator under this

article, or by The Life Insurance Guaranty Corporation or The Life and

Health Insurance Company Guaranty Corporation of New York, and claims

described in subsection (d) of section seven thousand seven hundred

thirteen of this chapter.

(2) Class two. Debts due to employees for services performed to the

extent that they do not exceed one thousand two hundred dollars and

represent payment for services performed within one year before the

commencement of a proceeding under this article. Such priority shall be

in lieu of any other similar priority which may be authorized by law as

to wages or compensation of employees.

(3) Class three. All claims for payment for goods furnished or

services rendered to the impaired or insolvent insurer in the ordinary

course of business within ninety days prior to the date on which the

insurer was determined to be impaired or insolvent, whichever is

applicable.

(4) Class four. All claims under insurance policies, annuity contracts

and funding agreements, and all claims of The Life and Health Insurance

Company Guaranty Corporation of New York or any other guaranty

corporation or association of this state or another jurisdiction, other

than claims provided for in paragraph one of this subsection and claims

for interest.

(5) Class five. Claims of the federal or any state or local

government. Claims, including those of any governmental body for a

penalty or forfeiture, shall be allowed to this class only to the extent

of the pecuniary loss sustained from the act, transaction or proceeding

out of which the penalty or forfeiture arose, with reasonable and actual

costs occasioned thereby. The remainder of such claims shall be

postponed to the class of claims under paragraph eight of this

subsection.

(6) Class six. Claims of general creditors and any other claims other

than claims under paragraphs seven and eight of this subsection.

(7) Class seven. Surplus, capital or contribution notes, or similar

obligations.

(8) Class eight. The claims of (i) policyholders, other than claims

under paragraph four of this subsection, and (ii) shareholders or other

owners.

(b) Every claim under a separate account agreement providing, in

effect, that the assets in the separate account shall not be chargeable

with liabilities arising out of any other business of the insurer shall

be satisfied out of the assets in the separate account equal to the

reserves maintained in such account for such agreement and, to the

extent, if any, not fully discharged thereby, shall be treated as a

class four claim against the estate of the life insurance company.

(c) For purposes of this section:

(1) "The estate of the life insurance company" shall mean the general

assets of such company less any assets held in separate accounts that,

pursuant to section four thousand two hundred forty of this chapter, are

not chargeable with liabilities arising out of any other business of the

insurer.

(2) "Insurance policies, annuity contracts and funding agreements"

shall mean all policies and contracts of any of the kinds of insurance

specified in paragraph one, two or three of subsection (a) of section

one thousand one hundred thirteen of this chapter and all funding

agreements described in section three thousand two hundred twenty-two of

this chapter, including all separate account agreements, except that

separate account agreements referred to in subsection (b) of this

section shall be included only to the extent referred to therein.

(3) "Separate account agreement or agreements" shall mean any

agreement or agreements for separate accounts referred to in section

four thousand two hundred forty of this chapter.